1.03.2010

The Lost (Bush) Decade

If you ever were in doubt about the effects of the Bush Administration (and "conservatism in general) on the health of this country's economy, doubt no more.

For the first time in nearly 3/4 a century, the economy over a previous decade has shown zero growth. ZERO. ZER. O.

For most of the past 70 years, the U.S. economy has grown at a steady clip, generating perpetually higher incomes and wealth for American households. But since 2000, the story is starkly different.

The past decade was the worst for the U.S. economy in modern times, a sharp reversal from a long period of prosperity that is leading economists and policymakers to fundamentally rethink the underpinnings of the nation's growth.

It was, according to a wide range of data, a lost decade for American workers. The decade began in a moment of triumphalism -- there was a current of thought among economists in 1999 that recessions were a thing of the past. By the end, there were two, bookends to a debt-driven expansion that was neither robust nor sustainable.

There has been zero net job creation since December 1999. No previous decade going back to the 1940s had job growth of less than 20 percent. Economic output rose at its slowest rate of any decade since the 1930s as well.

[snip]

"This was the first business cycle where a working-age household ended up worse at the end of it than the beginning, and this in spite of substantial growth in productivity, which should have been able to improve everyone's well-being," said Lawrence Mishel, president of the Economic Policy Institute, a liberal think tank.

The question is why?

But beyond these dramatic ups and downs lies an even more sobering reality: long-term economic stagnation. The trillions of dollars that poured into housing investment and consumer spending in the first part of the decade distorted economic activity.

Capital was funneled to build mini-mansions in Sun Belt suburbs, many of which now sit empty, rather than toward industrial machines or other business investment that might generate economic output and jobs for years to come.

Keep in mind this was a republican "conservative" president and his "conservative majority (of the first 6 years of the decade & his 8 year presidency) who's borrowing and carefree spending helped create the underlying breeding ground for the economic downward turn to thrive (and that's putting it lightly).
The first decade of the new century was an experiment in what happens when an economy comes to rely heavily on borrowed money.

"A big part of what happened this decade was that people engaged in excessively risky behavior without realizing the risks associated," said Karen Dynan, co-director of economic studies at the Brookings Institution. "It's true not just among consumers but among regulators, financial institutions, lenders, everyone."

The experiment has ended badly. While the stock market bubble that popped in 2000 caused only a mild recession, the housing and credit bubble has had a much greater punch -- driving the unemployment rate to a high, so far, of 10.2 percent, compared with a peak of 6.3 percent following the last such downturn.

But will this next decade normalize growth, reversing the course of the previous one? Only time will tell.
And the question of how Washington can prevent a recurrence is an overarching theme in the Obama administration's efforts to overhaul the financial system and support growth through investments in clean energy and other areas. "One of our challenges now," President Obama said in November, "is how do we get what I call a post-bubble growth model, one that is sustainable."
Unfortunately, I'm not that hopeful. I've seen things from this president that leads me to believe corporate interests, aided by corporate donations to corporate democrats who obstruct any legislation that looks, smells or feels anti-corporate in any way, shape or form (when in reality it is being done not just for the health of the nation, but for the corporate structure itself), will get in the way of a real recovery, and it's not very encouraging.

Add the fact that Democrats have no natural instinct to use the damage done by conservatism as a weapon to permanently send it and it's supporters back to the stone age, and you have a recipe for another disaster in the very near future (both in the economic terms, as well as in the political ones).

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